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What to Do with DU and LP?


Lost in all of the wrangling over what to do with Fannie Mae and Freddie Mac is what the author perceives as an equally important issue of what to do with Fannie's Desktop Underwriter (DU), Freddie's Loan Prospector (LP) and the other various technologies developed by the government-sponsored enterprises (GSE). The housing bubble was created in large part because of the automated underwriting systems (AUS), with their ability to easily modify the types of loans the GSEs would accept. As nefarious as these systems proved to be, they were just technological tools. It took programmers, underwriters and, most importantly, management teams to build and modify these tools to reap enormous profits at the ultimate expense of the US taxpayer, consumers, banks, and others. These complex systems are very powerful, and they now have incorporated many years of refinement and experience. They are certainly not evil by themselves and, in fact, continue today to approve very viable loans.

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